Eleven members approved the resolution - two more than the nine required to pass it - but the US envoy used the veto available only to the five permanent members of the council.

Three countries - the UK, Germany and Romania - abstained.

The "targeted assassination" by Israeli security forces of Sheikh Yassin brought tens of thousands of Palestinians out on to the streets in fury and drew condemnations from governments around the world.

Algeria's ambassador, Abdallah Baali, said the failure of the vote meant "the Security Council is not sending the right message to the world, which has unanimously condemned this crime.

"But it is certainly sending the wrong message to Israel."

He added: "As if doomed to fail whenever it has to deal with the intractable situation of the Middle East, the Security Council has come to the conclusion once and for all that it has no say in the terrible tragedy that is unfolding in this part of the world."

The BBC's correspondent at the UN, Susannah Price, says the backers of the bill probably feel the majority vote in favour of the resolution gives them the high ground, despite its ultimate failure.

The resolution may now be taken to the 191-member UN General Assembly, where the US has no veto.

Unlike resolutions endorsed by the Security Council, the draft would not acquire the force of international law were it passed in the General Assembly, but it would send a strong message.

EU condemnation

The European Union says the Israeli-Palestinian conflict has been made worse by the killing of Sheikh Yassin.

In a draft statement to be issued at the EU summit in Brussels on Friday, EU leaders also warn that the bloc will not recognise any unilateral changes to the Israeli borders.

Correspondents say this is an attempt to head off any efforts by Israel to use its security barrier to take over extra territory.

Israel insists it needs the barrier to keep out Palestinian suicide bombers.